Good results for the Heinemann Group in 2019 with revenue growth of 5.3 percent
Covid-19 pandemic causes revenue decline of almost 60 percent in the first half of 2020 compared to the previous year
Implementation of comprehensive package of cost-cutting measures
Travel retail business model remains intact: rising spend per pax in the re-start phase
Hamburg, 21 August 2020. Gebr. Heinemann closed the year 2019 with a turnover growth from 4.6 to 4.8 billion euros and a good financial result. The Covid-19 pandemic, which brought global mobility to a complete standstill for weeks in the beginning of March causing a dramatic slump in the travel market, brought about severe losses for the family business. „During our long-standing history we have seen many crises. This gives us some points of reference. But the scale of this pandemic is unprecedented. It is clear that the road to a recovery of the travel market will be very long. We are talking about years, not months,” says Max Heinemann, Chief Executive Officer at Gebr. Heinemann and representative of the fifth generation of owners, about the current situation. “However, as a family business, we think in generations, not in quarters.”
Review: Figures for 2019
The controlled turnover of the Heinemann Group in 2019 was 4.8 billion euros. This corresponds to a growth of 5.3 percent compared to the turnover of 4.6 billion euros in 2018. “We were able to close the 2019 financial year with a good result which was above that of the previous year and to expand our strong position in many regions and sales channels,” explains Stephan Ernst, Chief Financial Officer at Gebr. Heinemann.
Turnover in the retail sector rose by 7.2 percent to 3.9 billion euros. This increase is mainly due to new business at Istanbul Airport, where Gebr. Heinemann launched a center management model in April 2019.
With a 78 percent share of sales, business at airports was the strongest sales channel for the group. It is followed by the border shop business, which accounts for 12 percent of total sales. Broken down by category, the spirits, tobacco, confectionery and fine food product range was the strongest in 2019, accounting for 55 percent of group sales, followed by perfume & cosmetics with 34 percent and fashion & accessories with 9 percent share of sales. „As in previous years, our investments in 2019 amounted to around 100 million euros,” the CFO continues. “In addition to investments in inorganic growth, such as the purchase of the Russian border shop operator Kapo Duty Free, we have again invested a considerable amount in digitalisation, automation and logistics.”
H1/2020: Impacts of the corona pandemic
The year 2020 will be different to all 140 previous years in the history of Gebr. Heinemann. After a promising start, the outlook for the coming months and years had to be adjusted from March 2020 onwards due to the worldwide spread and effects of Covid-19. For the months of March to May, and to a large extent also in June 2020, all sources of income had almost completely slumped. For Gebr. Heinemann, the severe effects are noticeable in the operative business in all regions and channels, in retail and distribution. “In the first half of 2020, the Heinemann Group recorded a decline in turnover of almost 60 percent compared to the same period last year, in spite of the strong months of January and February,” says CFO Stephan Ernst.
“In the summer holiday month of July 2020, when travel restrictions had already been partially lifted, turnover was still 75 percent below the turnover of July 2019.” Even if travelling slowly resumes, the second half of 2020 will remain far below expectations and the results of 2019. A short-term improvement of the difficult situation is therefore not to be expected.
To safeguard our business model during the re-start, a comprehensive package of measures to reduce costs and secure Gebr. Heinemann's liquidity is currently being implemented. Operating expenses have been cut, investments have been limited to operationally necessary measures and current assets have been reduced. With regard to rents and concession fees at the airports, Gebr. Heinemann is in close contact with its partners in view of the significantly reduced passenger volume. Initial successes have already been achieved in discussions in this area. The same applies to the discussions on conditions and the agreements with suppliers.
„In terms of personnel costs, savings of slightly over 30 percent were achieved in the first half of the year through making use of government subsidies and job cuts,” reports Stephan Ernst and adds: “However, further adjustments will have to be made to the staffing structure – both at sites worldwide and at corporate headquarters – in order to reduce personnel costs in the longer term and adapt the size of the organization to the new market conditions – to make it more lean and more effective for the re-start.”
Outlook: The future of Travel Retail
The corona-related slump in the global travel market will not only have a considerable impact on the development of turnover in 2020 but also in the following years. Although many Heinemann shops have now resumed operations and there are signs of slight growth from month to month, years will pass before the company returns to the sales level of 2019.
The recovery in air travel and almost all other distribution channels in the travel market will certainly vary considerably from region to region. “Even though travel will change and we will have to adapt to a different, new market, we are certain that the travel retail market will remain an important part of travel and especially of airports in the future. Our initial observations are positive: we are seeing in our re-opened shops that the few travellers also buy and we are even recording rising sales per passenger. We must therefore learn to adapt to the new market and the new customer needs early and quickly,” says CEO Max Heinemann.
Despite all the challenges arising from the global crisis, Max Heinemann is looking ahead: “Our medium and long-term focus is the same as before the corona crisis: we are and will remain the reliable partner in travel retail and we will do everything in our power to ensure that Gebr. Heinemann can continue to develop successfully in the fifth generation.”
You may download the GH Annual Report 2019 here.
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About Gebr. Heinemann SE & Co. KG
Gebr. Heinemann is one of the top retails and wholesalers on the international travel retail market and the leader on the European market. It is the only family-run business among the global players of the travel retail industry. Gebr. Heinemann operates Duty Free & Travel Value Shops, fashion label boutiques under license and concept stores at international airports as well as shops at border crossings and on board cruise ships. In addition, the trading company supplies international airports, airline airlines, cruise ships and onboard shops worldwide with a constantly growing range of international branded goods in the areas of perfume, perfumes & cosmetics, wine & spirits, confectionery, delicatessen, tobacco products, fashion & accessories, watches & jewellery and many more.
Gebr. Heinemann has had its headquarters in what is now the HafenCity district of Hamburg since 1879. The company is managed by cousins Claus and Gunnar Heinemann and Gunnar’s son and CEO Max Heinemann, the fourth and fifth generation of the family to run the business hand in hand. Gebr. Heinemann has more than 8,000 employees around the world. In 2019, the family-run company generated a controlled group turnover of 4.8 billion euros.
